"Market watchers said the better-than-forecast report comes at a key juncture for stocks. Both the S&P 500 and Nasdaq finished April with their first monthly declines this year, and the Dow eked out a narrow gain last month.

"'You needed a second leg for [momentum in stocks] not to decelerate,' said Mark Lehmann, director of equities at JMP Securities in San Francisco. 'Then May kicks off, and you've got a piece of very good news.'"

Our Original Post Continues:

Stocks are rallying today — the Dow Jones Industrial Average is the highest it's been since the last day of 2007 — thanks to stronger-than-expected news about the strength of the nation's manufacturing sector. As of 1:15 p.m. ET, the Dow stood near 13,328. Other major indices were also up.

The news behind the rally came from the Institute for Supply Management, which said its research indicates that "economic activity in the manufacturing sector expanded in April for the 33rd consecutive month, and the overall economy grew for the 35th consecutive month."

As The Associated Press says, "solid growth in manufacturing suggests the slowdown in hiring and factory output in March may have been a temporary lull." Bloomberg News adds that the news "bolstered investors' optimism in the world's largest economy."

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